Take advantage of the seasonality of the cow market through creative management and marketing
Cattle producers are signaling that fall is here – the annual ritual of weaning and pregnancy checking has begun in most areas of the U.S. However, producers in some areas of the West and mid-Atlantic regions have already weaned their calves due to severe drought conditions.
Since beef cattle producers generate the majority of their annual income via the sale of calves (about 80%), typically a lot of effort is put into maximizing the price at which they are sold. Yet, practically no effort is spent to maximize the price on the other 20% of their income – which is acquired through the sale of cull cows (also known as “market cows”).
A producer once told me: “we spend all of our time fighting tooth-and-nail to get another dollar or two on our calves, and then we give away our culls.” I couldn’t agree more.
Creative Cow Marketing
Few price graphs show opportunity in the marketplace better than the seasonal slaughter cow price data reported by USDA (Figure 1). This graph shows the change in price for utility slaughter cows by month from 1997 through 2006.
These data indicate that the increase in price from November to March of the next year averaged about $6.00/cwt since 1997, equivalent to an increase of about 14%. This equates to about $72/head for a 1,200 lb cow.
Interestingly, in the past 15 years, the month with the lowest average price for slaughter cows was November in 10 of those 15 years. December or January was the lowest month in another 4 of those years. Since most market cows in the U.S. are sold between October and January, the marketplace is flooded and prices are lowest at that time.
So, the obvious question would be: why do producers determine 20% of their income by selling animals when prices are consistently at their lowest for the year?
The answer seems obvious – when a cow is determined as non-pregnant by a veterinarian, we want to get rid of her as soon as possible. She is no longer considered a ‘money-maker,’ but rather a ‘money-taker.’ In our eyes, the quicker she can be sold the less money we throw away. This is a true and logical argument, but it completely ignores the inherent opportunity in the marketplace due to seasonal price patterns that have been documented over the past three decades.
An Opportunity in Cow Feeding
Cattle-Fax regularly reviews the profitability of waiting to sell market cows until prices approach their peak in March. They assume weight gains of about 1.5 lbs/day, a 95-day feeding period, limited death loss, and reasonable feed costs.
Based on these assumptions and their data, Cattle-Fax reported this year that it has been profitable to hold cows over until market prices improved in 27 of the last 27 years (since 1980). In fact, an average of $60 per head profit could have been generated each year. In just the past 5 years when market cow prices have been very strong, profit still averaged $59/head.
In 2003 Iowa State researchers reported similar results when market beef cows were fed for either 69 or 90 days. Cows gained an average of 294 lbs (3.87 lbs/day) at a cost of $0.85/lb of gain. On average, each cow returned a profit of $66.04/head.
The economic benefits of feeding market cows are actually three-fold. However, really only two of these advantages are occurring in today’s marketplace. In addition to selling cattle on a higher market (about $4-6/cwt higher, depending when cows are sold), producers also sell more pounds at the higher price (150-250 lbs per cow if fed for about 100 days, along with improved dressing percent of 5 percentage points or more).
The third benefit comes via improved carcass quality. If reasonably-priced grain is available, carcasses from young market cows can be “upgraded” to meet demand for an expanding market known as the “White Cow” market. Unfortunately, consistent premiums are not yet available for these carcasses in today’s market.
The White Cow Market
The White Cow grade is not an official USDA quality grade, but rather is used by packers to roughly identify carcasses from cows that have marbling, white fat (not yellow), and relatively bright red lean color. A few major market cow packers are beginning to pay a premium for these cattle on-the-rail (when sold on a carcass weight basis). Although this premium is not reported to USDA, it appears to range from $5-10/cwt of carcass weight (or about $40-80/head depending on carcass weight).
Generally, the middle meats (ribs and loins) from White Cow Carcasses are being used to supply low-priced steaks to the food service industry that appear to be higher in quality and more palatable than traditional non-fed market cow beef.
The production of a White Cow requires feeding market cows a high concentrate diet for about 70-120+ days prior to slaughter. This can improve the quality of the carcass through increased marbling, muscle tissue replenishment (including ribeye area), and by changing fat color from yellow to white.
The Bottom Line
Feeding-out market cows through the winter may not be the best decision for all producers. However, researchers have shown consistent profits of at least $60/head when healthy and sound cows that are in thin or moderate body condition were fed.
Prior to starting a cow feeding program, producers should consider several key factors, including: the seasonality of market cow prices, the differential between carcass and live cow prices, price differences between market cow grades (including a possible premium for White Cows), and the cost of feeding market cows.
Finally, since feed is the primary cost involved in feeding out market cows, producers should lock-in feed prices prior to feeding any cows as well as determine in advance who will be buying their fed cows when they are ready to be sold in late winter or spring.
Dr. Jason K. Ahola is a State Beef Extension Specialist with the University of Idaho, based at the Caldwell Research and Extension Center in southwestern Idaho. Contact him at email@example.com or 208-454-7654.